Nio stock price forecast: earnings highlight major headwinds

By:
on Aug 29, 2023
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  • Nio share price crashed hard after the company’s earnings.
  • Like Tesla, the company’s price cuts have hurt its profit margins.
  • Nio is facing numerous headwinds as its revenue growth slows.

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Nio (NYSE: NIO) stock price has been left in the dust as other EV shares rebound. The stock dropped to a low of $9.40, the lowest level since July 7th. It has tumbled by over 37% from the year-to-date high even as other EV stocks like Xpeng and VinFast have surged recently.

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Nio earnings review

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The electric vehicle (EV) industry in China has been going under serious slowdown as the economy slows. As a result, many companies in the sector have been forced to slash prices in a bid to attract more buyers.

Tesla was among the first companies to start slashing prices, with its most recent reduction happening this month. At the same time, there are concerns about the overall performamce of the economy as the youth unemployment rate surged and house prices retreated.

This slowdown was visible when Nio published its results on tuesday. The resulrts revealed that its revenue plunged by more than 14.8% in Q2 to $1.21 billion. It missed analysts’ forecasts by about $60 million.

The company delivered 23,520 vehicles in the quarter while the margin came in at 6.2% , down from the previous 16.7%. Nio expects to deliver between 55k and 57k vehicles in the third quarter. It also sees its total revenues coming in at between $2.6 billion and $2.69 billion.

Nio’s main challenge is that it is primarily a Chinese company with no major exposure abroad. China is a highly competitive market with almost 100 companies in the sector. While Nio has licenses to sell its vehicles in Europe, it will meet more established firms like Tesla, VW, and Hyundai.

The other challenge is that it is now making less money per every car it sell because of the price war.

Nio stock price forecast

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My last Nio prediction was accurate as the stock jumped to $16. At the time, I argued that the company was quite undervalued and that its stock would continue the comeback. Recently, the stock has erased most of those gains and moved to the lowest level since July 10th.

On the daily chart, the shares have moved below the 25-day and 50-day exponential moving averages. The two averages are about to make a bearish crossover. They have also moved below the important support level at $10.66, the highest level on March 30th. 

Therefore, the shares will likely continue falling as sellers target the next key support level at $8 as the company’s headwinds remain. This view will become invalid if the stock retests the resistance level at $12.

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